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Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data

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  • Boubaker, Heni
  • Cunado, Juncal
  • Gil-Alana, Luis A.
  • Gupta, Rangan

Abstract

Using annual data spanning the period of 1258–2018, we test the safe haven characteristic of gold in the wake of global crises. We find that, when we allow for regime-switching to capture nonlinearity and structural breaks, gold serves as a strong hedge against crises, especially during the bullish regime of the market, and in particular from the post-World War I period, as suggested by a time-varying model. In comparison, silver, however, does not seem to possess the safe haven property over the historical period of 1688–2018. Finally, we also find that global crises can accurately predict real gold returns over a long-span (1302-2018) out-of-sample period.

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  • Boubaker, Heni & Cunado, Juncal & Gil-Alana, Luis A. & Gupta, Rangan, 2020. "Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
  • Handle: RePEc:eee:phsmap:v:540:y:2020:i:c:s0378437119317455
    DOI: 10.1016/j.physa.2019.123093
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    1. Salisu, Afees A. & Raheem, Ibrahim D. & Vo, Xuan Vinh, 2021. "Assessing the safe haven property of the gold market during COVID-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Global crises; Gold; Safe haven; Regime-switching model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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